The Crown Prosecution Service has warned big business, charities and other organisations that a law change giving them increased responsibilities for preventing fraud is about to go live.
From the start of September, the new “failure to prevent fraud” offence comes into force, under the Economic Crime and Corporate Transparency Act 2023. It makes large organisations criminally liable if they fail to prevent fraud committed by an employee or agent for the organisation's benefit.
The CPS said it expected the new offence to “encourage better corporate behaviour”, such as putting in place systems and training to prevent fraud happening.
Organisations covered by the scope of the act – which includes those public bodies that are incorporated as companies, such as HS2 Ltd – are at risk of unlimited fines if wrongdoing is found and they do not have proper fraud-prevention procedures in place.
Hannah von Dadelszen, who is the CPS’s chief crown prosecutor for economic crime, said the new offence was a “major step forward” in tackling corporate crime.
“Preventing fraud is essential to protecting the public and our economy,” she said. “The public are entitled to have confidence that companies will be held to account for wrongdoing.
“Large companies, charities and other organisations need to act now to make sure they have proper fraud prevention systems in place.”
The CPS and the Serious Fraud Office have this week published new guidance for prosecutors that covers the “failure to prevent fraud” duty and other changes already introduced under the 2023 act. Those changes, known as the “identification doctrine”, give a broader definition of who can be considered responsible for a company's actions.
SFO director Nick Ephgrave said the updated guidance would help prepare prosecutors to pursue corporations that are failing to comply with their responsibilities under the law.
“Now is the time to take action,” he said. “Corporations must get their house in order or be ready to face investigation.”
To be subject to the “failure to prevent fraud” offence, organisations must be large enough to meet two of the following three criteria: Have more than 250 employees; annual turnover of more than £36m; a balance sheet in excess of £18m.
The CPS said that the principal defences available to a large organisation would be the ability to demonstrate that reasonable fraud prevention procedures were place, or that it was not reasonable to expect the fraud in question to have taken place.